David Brenchley, February 26 2023, The Sunday Times:
With the best one-year fixed savings account now paying 4.31 per cent, riskier investments such as stocks and shares may seem less attractive than they have been for a long time. If you can get a high interest rate on your money, why take more risk in the stock market?
One reason, of course, is that company shares can grow your capital and also pay regular dividends.
There are 14 investment trusts that buy shares in companies offering a dividend yield of more than Al Rayan’s 4.31 per cent one-year fixed rate, according to the research house Stifel…
Sheridan Admans from the investment platform Tillit cautioned investors against chasing the highest yields, which can indicate that a company is in distress rather than in rude health…
Be wary of trusts that aim to pay shareholders a fixed amount of their net asset value (NAV) each year. When the stock market goes through a bear market as it did in 2022, the NAV will fall and the dividend will automatically be cut…
Stifel likes Abrdn Asian Income Fund, which yields 4.4 per cent, and Schroder Oriental Income, which yields 3.8 per cent. It is negative about Henderson Far East Income, where the share price trades on a premium to its underlying portfolio, making it potentially expensive.
Matthew Read from the research firm QuotedData said that its performance had been worse than its peers. “It is hard to see how the additional income Henderson Far East offers justifies the lower overall returns,” he said.
Similar accusations can be thrown at European Assets and Abrdn Equity Income, which have the highest yields of their peer groups but the worst performance records. Read prefers Montanaro European Smaller Companies, despite a very low yield, to the former and Merchants or Murray Income to the latter.
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